Disclaimer: Questergate currently does not invest in the cryptocurrency market and this is because we consider cryptocurrencies to be too volatile for a stable & safe investment in the short term. Therefore this article is only for educational purpose and not an investment advice or strategy.
Have you ever had to wonder what cryptocurrency really is and how to get your head wrapped around it?
Do you know learning and investing in cryptocurrency is a form of investment and is not as complicated as it may seem?
In this post, we will breakdown, in simpler terms, everything you need to know about cryptocurrency as a beginner starting with the basics.
Let’s begin….
What is Cryptocurrency?
Cryptocurrency has been called different things by different people including “money of the future”, “risky asset”, “online money” amongst others.
However, Cryptocurrency in a simpler term is a type of digital currency (money) that only exists electronically. This means that it is not tied to any physical coins or bills like our traditional paper money.
Cryptocurrency has no use or value outside possession. Its value is attached to the fact that it only costs money because someone else is in possession of it and wants money to give it you.
Why was Cryptocurrency formed?
The main purpose for Cryptocurrency is to fix traditional money problems by putting in the hands of the holder, the responsibility and power in the currency.
Even though this may sound good, Cryptocurrency is not without its own problems. It has generally overtime faced two major problems which are;
- Its value, production and authenticity rely and require a central authority to regulate.
- It falls prey to the creation of fraud.
How does Cryptocurrency work?
To be able to understand how cryptocurrency works, you will need to understand the following principles and technologies.
Blockchain – Blockchain is most simply defined as a decentralized, distributed ledger technology (DLT) that records the provenance of a digital asset.
Outside financial services, blockchain has other uses such tracking art ownership, supply chain management and even digital collectibles.
Cryptography – This is a secure communication technique that allows only the sender and intended receiver of a message to view the information contained in the message.
It is more like an encrypted form of communication information between the sender and receiver of the message.
Cryptography and blockchain work hand-in-hand to help cryptocurrencies generate new coins, create a secure system and enforce legitimate transactions.
Peer-to-Peer – Without the need for a broker (middleman), Cryptocurrency can be shared between two people. The transactions are done at very low processing fees that compensate the network that makes it seamless for users to transfer and make payments with traditional services.
This means that you would not need bank or zelle or paypal services.
Decentralization – As seen with Bitcoin, this simply means that authoritative power is distributed among all the peers on a network and there is no individual point of failure.
Typically, what this is saying is that, in order to be able to destabilize a coin like Bitcoin, the individual would have to have destabilized it to about at least 51% of the computers network which is an obviously impossible task.
What are the forms of Cryptocurrency?
There are over 2,500 Cryptocurrencies in the world and many of them use their own custom blockchain designed to their specifications and you do not need to study all of them to understand the basics of cryptocurrency.
However, there are a few popular ones that can give you an idea.
BITCOIN (BTC)
Bitcoin fondly called “digital gold” debuted in 2009 and has since then reigned over other cryptocurrencies with a market capitalization of over $3Trillion. It dominates over other cryptocurrencies in the market with one bitcoin which is equivalent to $58,998.50 as at the time of writing this post.
LITECOIN (LTC)
This coin is referred to as the “digital silver” coin. Litecoin was created as a split from Bitcoin and released in 2011 as competition.
One Litecoin is eqivalent to about $216.49 as at the time of writing this post. This coin was made to process transactions faster and cheaper than Bitcoin.
ETHEREUM (ETH)
Ethereum is another strong cryptocurrency, but it isn’t meant to be a peer-to-peer payment system in the same way that Bitcoin is.
This coin launched in 2015 as a decentralized software platform that powers smart contracts (programmatically enforced contracts) and shared applications (“decentralized” apps or dApps).
dApps
These are autonomous, open source, have 100% uptime, and leverage all the benefits of a blockchain which makes it extremely difficult to hack or disrupt.
There are over 2,500 dApps using Ethereum’s blockchain and the blockchain of a few Ethereum competitors such as EOS, NEO, and Qtum.
Smart Contracts
These are like an auto string of codes that execute a certain task when specific conditions are met. For example, Nelly could set up a smart contract to “pay Josh $80 if he sends 10 various articles by 22 December, 2021.”
How smart cash works is as soon as Josh completes this task, the smart contract automatically pays him the $80 and if in the event that he doesn’t, then Nelly is returned $80.
In the part two of this post, we shall go on to talk about the Types of cryptocurrency that exists, crypto wallet, how you can buy or trade cryptocurrency as well as the rules and regulations of crypto.
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Disclaimer: Questergate currently does not invest in the cryptocurrency market and this is because we consider cryptocurrencies to be too volatile for a stable & safe investment in the short term. Therefore this article is only for educational purpose and not an investment advice or strategy.